In some economies relative supply may be unresponsive to changes in prices. For example, if factors of

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In some economies relative supply may be unresponsive to changes in prices. For example, if factors of production were completely immobile between sectors, the production possibility frontier would be right-angled, and output of the two goods would not depend on their relative prices. Is it still true in this case that a rise in the terms of trade increases welfare? Analyze graphically.

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International Economics Theory and Policy

ISBN: 978-0273754206

9th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

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